When talking about mining, it is implied that Bitcoin is digital gold. And when we talk about Ethereum, we wonder about its place in the world of crypto-currencies. Everyone reading this has heard of Ethereum and its cryptocurrency, Ether. This technology, which can revolutionize the Internet, is about to pick up its cruising speed. Ethereum 2.0 is this new version of the Ethereum platform. What is Ethereum 2.0?

Let’s first try to understand what Ethereum is. By simple definition, Ethereum is a software platform that facilitates the construction of decentralized applications through smart contracts. Many specialists see Ethereum as a new form of the internet. So to understand Ethereum, you first need to better understand how the internet currently works and its concept of centralization.

It is well known that our information transmitted over the Internet is stored on servers belonging to multinationals and governments. These servers also have our personal information such as name, telephone number, email address, credit card number, medical file, etc. Most of these servers belong to and are managed by companies known as GAFAM (Google, Amazon, Facebook, Microsoft).

The revolutionary aspect of Ethereum is to operate computer systems online without the use of intermediaries. For example, instead of using Google servers, Ethereum allows applications to connect to a network of many private computers (decentralized system).

Ethereum is a technological platform allowing anyone who wants or can, develop and deploy decentralized applications, also called (DApps.) These applications do not need a central server hence the name decentralized application. Ethereum does not rely on any central authority to help it run.

The Ethereum platform being understood, you should know that it continues its inexorable evolution in order to solve problems that arise in its efficiency. In this evolution, currently in development, it is Ethereum 2.0. Ethereum 2.0 is an update whose objective is to solve the main problems that the protocol has encountered in its operation. At its launch Ethereum suffered from two main problems: the relative slowness in the validation of transactions and the enormous fees that the network demands.

This update is therefore crucial because the future of Ethereum depends on it. To get there and start the update, the scientific community had to change the algorithm that was the consensus at the time to change from one mechanism to another. It is therefore the proof of work mechanism that begins with Ethereum, will be replaced by that of the proof of stake. The question that arises here is: in what are the two mechanisms different? And what does this mechanism imply for the Ethereum network?

To clearly understand the difference between proof of work (PoW) and proof of Stake (PoS), you must first remember how bitcoin works. The proof of work is a consensus algorithm which is used in the validation of transactions, then gathers them in the form of blocks and it is these blocks, once linked together, that will form the blockchain. This proof of work mechanism is therefore used by the majority of cryptocurrencies.

The work of minors is the basis of the operation of the PoW system. This means that it is the computing power of the miners computers who obtain a cryptographic puzzle. It is therefore a race that allows the fastest participant to solve a complex mathematical problem, in order to obtain the next block in blockchain. The reward for participating in securing the network is a small amount of the cryptocurrency he has just recovered through his mining work. And that will be Ether in the case of Ethereum.

If the efficiency in the validation of the transactions of a decentralized network is proven for the proof of work, it is quite clear that the computing power of the computers in this system is only used for the security of the network. The competition of miners, which requires time and the patience of a hunter, involves a significant expenditure in electrical energy, which is not a viable solution from the point of view of the environment.

If you know how Bitcoin works, you have surely heard of Proof of Work (PoW). PoW is a consensus algorithm that validates transactions and then aggregates them into blocks. These blocks are then linked together to form a blockchain. This mechanism is used by the majority of cryptocurrencies.

In this system, miners (network users) lend the computing power of their computers to solve a cryptographic puzzle. The first to solve this complex mathematical problem obtains the right to add the next block to the blockchain. As a reward for having participated in securing the network, the miner receives a small amount of the cryptocurrency he has just mined (Ether in the case of Ethereum).

PoW has proven to be a very effective mechanism for validating transactions in a decentralized network. The problem with PoW is that the computing power of computers is not used for any purpose other than network security. Competition among miners involves a large expenditure of electricity. This is not the most viable solution from an environmental point of view.

The Proof of Stake is a system that can solve this problem. It is no longer a question for participants of lending the computing power of their computers to the network but of locking the crypto-currency they possess. The protocol then randomly assigns the right to validate a block to one of the participants. With this mechanism, the probability of being chosen to validate the block is proportional to the amount of cryptocurrencies locked. The larger the amount, the more likely the participant is to be chosen to validate the transaction.

This staked cryptocurrency incentivizes participants to maintain network security because if they fail to do so, they can lose everything. An error in the validation of a transaction leads to the total or partial destruction of the locked cryptocurrency.

Thus, the Proof of Stake is a consensus algorithm that does not require investing in expensive hardware. This mechanism being more accessible, it allows to bring more validators on the network. The more validators there are, the more decentralized the network and the more security there is. Indeed, the more decentralization there is, the less chance there is for an attack 51.

An attack 51 is when a malicious user seizes the majority of the nodes of the network which gives him the possibility of validating transactions as he sees fit.

But switching from one consensus algorithm to another is not easy. For the Ethereum network, this requires several phases:

Phase 0

The Beacon chain was launched on December 1, 2020 and initiated the transition from Proof Of Work to Proof Of Stake. This blockchain was developed in parallel with the main blockchain in order to allow the first validators to lock (or “stake”) their Ethers. The number of Ethers required to participate in the Beacon chain has been set at 32.